From the Sector

• Sales of CHF 1 510.9 million,
• Order intake of CHF 1 157.3 million in 2022; order backlog of around CHF 1 540 million as of December 31, 2022
• EBIT margin of 2.1%
• Implementation of action plan to increase profitability ongoing
• Dividend of CHF 1.50 per share proposed

With record sales of CHF 1 510.9 million, Rieter achieved an increase of 56% compared with the previous year (2021: CHF 969.2 million). In the second half of 2022, especially in the fourth quarter, the measures introduced to address material bottlenecks had a positive impact. Consequently, sales increased to CHF 890.3 million compared with the first six months (first half-year 2022: CHF 620.6 million).

Order intake was CHF 1 157.3 million in 2022 (2021: CHF 2 225.7 million) and thus remained at a high level thanks to the company’s technological lead and broad international presence. The market situation, especially in the second half of 2022, was characterized by investment restraint and below-average capacity utilization at spinning mills due to geopolitical uncertainties, rising financing costs, and consumer reticence in important markets.
The company had an order backlog of around CHF 1 540 million at the end of 2022, which thus extends into 2023 and 2024.

The profit at the EBIT level in the 2022 financial year was CHF 32.2 million (2021: CHF 47.6 million). The result was strongly influenced by substantial cost increases, which could only be offset in part through price increases or other remedial measures. In addition, to compensate for material shortages, expenses were incurred in connection with the development of alternative solutions, and in relation to the acquired businesses.

Completion of the Acquisition
Rieter consolidated the acquired automatic winding machine business with effect from April 1, 2022. This acquisition completes Rieter’s system offering in the largest market segment of ring and compact spinning, thus significantly strengthening the company’s market position.

Action Plan to Increase Profitability
Implementation of the action plan to increase profitability is ongoing. With regard to the margins for the order backlog, which remains high, the already implemented price increases in combination with a positive trend in costs, particularly in logistics, are having a favorable impact. In addition, progress was made in eliminating material bottlenecks and reducing expenses for the three acquired businesses.

Dividend
The Board of Directors proposes to the shareholders the distribution of a dividend of CHF 1.50 per share for 2022. This corresponds to a payout ratio of 56%.

Outlook
For the coming months, Rieter expects below-average demand for new equipment at first, with a revival expected in the second half of 2023 after ITMA, the leading trade fair in Milan (Italy). Rieter also believes that demand for consumables, wear & tear and spare parts will recover during 2023.
For the 2023 financial year, due to the high order backlog, Rieter anticipates sales in the order of magnitude of the previous year.
The realization of sales from the order backlog continues to be associated with risks in connection with the ongoing geopolitical uncertainties, rising financing costs, continuing bottlenecks in the supply chains, and possible, currently unforeseeable consequences of the earthquake in Türkiye in February 2023. Despite the price increases already implemented, further global cost increases continue to pose a risk to the growth of profitability. Rieter will specify the outlook in the 2023 semi-annual report.

Together with the Johann Jacob Rieter Foundation, the Rieter Group is supporting a new Endowed Professorship for Industrial Artificial Intelligence (AI) at the ZHAW School of Engineering. The Professorship is dedicated to teaching and research in the field of industrial applications of Artificial Intelligence and will be announced later this year.

The new Endowed Professorship will be established at the Center for Artificial Intelligence (CAI) of the ZHAW in Winterthur. It will focus, in particular, on the application of machine learning methods and knowledge-based systems in connection with processes in production and service.

For Rieter, the commitment is related to the implementation of its technology leadership strategy. The contribution of the Johann Jacob Rieter Foundation to sponsoring the Professorship is in line with the Winterthur Cluster Initiative. The increasing digitalization of production processes opens up new perspectives for Winterthur as a business location.

Building Expertise in the Field of Industrial AI
The Endowed Professorship will serve to build expertise in the field of Industrial AI and will oversee a group that will focus on teaching and research pertaining to trustworthy machine learning. This involves, for example, the deployment of artificial intelligence with the aim of optimizing production processes in relation to the use of raw materials and energy, and making expert knowledge more readily available.

In addition to research, for the purpose of knowledge transfer, the new professorship will also be active in teaching, in the bachelor's degree programs in Computer Science and in Data Science, in the Master of Science in Engineering, and in continuing education.

The annual commitment of CHF 300 000 over a period of six years will be financed equally by the Rieter Group and the Johann Jacob Rieter Foundation.
“The use of artificial intelligence in industry is becoming increasingly important, especially with regard to the potential of data for evaluation and control of complex processes. The support of the Johann Jacob Rieter Foundation and the Rieter Group will allow us to further expand AI research in the field of industrial applications,” explains Prof. Dr. Dirk Wilhelm, Director of the ZHAW School of Engineering.

“The use of Artificial Intelligence will make a significant contribution to automation and process optimization, and thereby advance sustainability in the textile industry. This makes it an important element of the leading technology that Rieter offers,” emphasizes Rieter CEO Dr. Norbert Klapper.

“The Smart Machines cluster is growing in importance,” says Thomas Anwander, member of the Foundation Board, and adds: “The Endowed Professorship for Industrial AI at the ZHAW aims to promote Winterthur as a technology location by pooling locally available strengths in mechanical engineering and Industry 4.0.”

• Exceptionally high order backlog and sustained strong demand
• Supply chain bottlenecks, COVID lockdown in China and significant cost increases
• Takeover of winding machine business leads to additional costs
• Sales and earnings adversely impacted in first half-year
• Considerably improved market position

Despite an exceptionally high order backlog and sustained strong demand, Rieter’s business situation in the first half of 2022 is characterized by the well-known supply chain bottlenecks, the repercussions of the COVID lockdown in China and the significant increases in material and transportation costs.

Further costs are added in connection with the takeover of the automatic winding business as of April 1, 2022.

These factors are adversely impacting both sales and earnings.

Rieter expects significantly higher sales in the first half of 2022 compared to the prior-year period (first half of 2021: CHF 400.5 million). Rieter anticipates a loss at the EBIT and net result level in the first half of 2022 (first half of 2021: EBIT CHF 9.0 million, net result: CHF 5.3 million).
The company is working intensively on the implementation of measures to minimize the impact of the supply chain bottlenecks, the COVID lockdown in China and the cost increases. The implemented price increases have a delayed effect, particularly in the machinery business. The integration of the automatic winding business is proceeding according to plan.

As soon as the situation in the sourcing markets has normalized, Rieter expects to benefit from the exceptionally high order backlog and the considerably improved market position as a result of the takeover of the automatic winding business as well as Accotex and Temco.
Rieter will provide a detailed report on the business results of the first half of 2022 in July 2022.

• Luc Tack und Stefaan Haspeslagh resign with immediate effect

The two members of the Board of Directors Luc Tack und Stefaan Haspeslagh announced on August 30, 2021, that they are resigning from the Board of Directors with immediate effect.

Rieter will inform the law enforcement authorities that there is no interest in continuing the criminal proceedings any further.

The Board of Directors welcomes the fact that a joint solution was found that is in the best interests of Rieter and Picanol, both of which are among the world’s leading textile machinery manufacturers.

According to Luc Tack, the Picanol Group (Belgium) will remain a shareholder of Rieter.

• Schlafhorst automatic winder as well as Accotex and Temco will be transferred from Saurer to Rieter
• Investment to complete Rieter’s ring- and compact spinning systems and in two attractive component businesses
• Closing expected during the month of August, implementation to be completed in six to nine months

On August 13, 2021, Rieter Holding Ltd., Winterthur/Switzerland, and Saurer Intelligent Technology Co. Ltd., Shanghai/China listed, signed an agreement by which Rieter will acquire three businesses from Saurer Netherlands Machinery Company B.V., Amsterdam/Netherlands, the parent company of Saurer Spinning Solutions GmbH & Co. KG, Uebach-Palenberg/Germany and Saurer Technologies GmbH & Co. KG, Krefeld/Germany.

With this acquisition, Rieter will complete the offering of ring- and compact spinning systems by acquiring the Schlafhorst automatic winder business. Additionally, Rieter invests in two attractive component businesses: Accotex (elastomer components for spinning machines) and Temco (bearing solutions for filament machines).

In total, the three businesses had a combined turnover of EUR 142 million in 2020, the year of the COVID crisis. In 2019 and 2018, the total combined turnover was at a level of EUR 235 million and EUR 260 million, respectively.

The purchase price for the three businesses is EUR 300 million on a cash and debt free basis. Rieter has financed the purchase price by cash and available credit lines.

Rieter and Saurer expect to close the transaction during the month of August. In the first step of the transaction, Rieter will acquire 57% of the shares of Saurer Netherlands. The shares will be returned to Saurer after the implementation of the transaction in six to nine months.

In connection with the transaction, it is envisaged that Rieter will supply automatic winders to Saurer in the future.